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Will regulators challenge questionable pension accounting?

A pair of articles over the weekend raised serious concerns about the nation's public pensions. The Wall Street Journal explored how public pensions continue to assume they'll earn a nearly 8 percent return each year despite the volatility and poor performance of the past few years. And The New York Times looked at how states are using accounting techniques to generate immediate savings by cutting the pension benefits of future workers.

The question is whether federal regulators will take a stand against questionable pension practices. Their authority is limited; the purview of public pensions falls squarely in the discretion of state law.

But the SEC is attuned to the issue. Earlier this year, a specialized SEC enforcement unit based in Philadelphia began investigating potential wrongdoing involving pensions.

Last month, the agency charged New Jersey with civil fraud for lying in financial documents about whether it had covered its pension obligations to teachers and other state employees.

In an interview last month, Elaine C. Greenberg, chief of the municipal securities and public pensions unit, told me, "We have a concern that there could be other states and municipalities or local governments out there that are not adequately disclosing the extent of their pension fund liabilities."

There is a huge debate about how states account for their pensions. Many states use an accounting method that economists say seriously understate how much they'll have to pay out to pension recipients and what they already have covered.

The Pew Center for the States says pension funds nationwide are underfunded by more than a half-trillion dollars.